Are you scared to trade the higher timeframes because you think there will be a lack of opportunity?
Perhaps, you're trading for the fun and excitement of it and you think the higher timeframes are just plain boring?
Well, good luck to you. My advice, save your money in your bank account and do not trade the market! If you're starting to hate me now (you won't be the only one) then given me a chance and keep on reading:
7 Reasons Why You Should Trade More Markets On Higher Timeframes:
1. You can avoid the algos hunting your trades
Did you know that trading algorithms now account for up to 70% of all intra-day moves in the financial markets? How the heck can you make money as a trader fighting robots who can take trades in nano-seconds? Well, there is a way if you know how.
Firstly, it's important to remember that these algorithms aren't just left in the market 24/5. They are turned on and off at the will of the trader managing them. That's right, there is still a human element involved. A trader is identifying which markets to trade, the market condition and has a robot to trade that condition. So, there is and will always be opportunities for human traders in the market.
Of course, there is no way we can compete with robots taking trades in nano-seconds. So, all we do is focus on trading higher timeframes like the daily and weekly chart. In some cases, trading the 4 hour or 1 hour charts can work but any less than that and you are susceptible to fighting against trading robots with no emotion!
2. Higher timeframes filter a lot of market noise
Financial markets have huge daily volumes and are affected by a stream of different news announcements throughout the day. As a trader we may know some of these ahead of time by looking at the economic releases. However, there are going to be occassions where the market is going to do what it wants to do which may sometimes be against you.
Because of the high volumes market techinicans often refer to lower timeframes as having a lot of market noise. Essentially, this means that price movements are so erratic that it cannot be used reliably to make trading decisions. Of course, when you look back historically at a lower timeframe chart you'll be able to identify patterns of trading opportunities. But, let's not forget that is looking back in time. It's far more difficult looking ahead of time on a lower timeframe.
When looking at the bigger picture we get a clearer picture of what is happening overall and who the most dominant player is - the buyer of the seller. Therefore, we can make better quality trading decisions as we have more information at hand and can analyse the overall picture.
3. Billion dollar money managers use the higher timeframes
Are you likely to catch Warren Buffett, Paul Tudor Jones or George Soros on a 1 minute chart? Highly unlikely! The people who are able to move the market, the real money managers, always look to take a bigger picture view and use the higher timeframes. Would you rather be trading with the big money or against them? I know where I would rather be!
Of course, you may get some prop traders who trade low timeframes but that's because they are fulfilling client orders and looking to make a little in between those trades. Too often, traders trade the lower timeframe without consulting the higher timeframe or try to turn a lower timeframe trade into a bigger timeframe trade as they see the dollar signs in their head.
Whether its foreign exchange trading, stock market trading or commodity market trading the higher timeframe is the godfather of them all.
4. Higher timeframe trading fits our 4 Point Trading System
Our 4 Point Trading System is very simple. It comprises of Selection, Timing, Management, Review - the four pillars of every trade we take. Too often, people jump straight into timing a trade by looking at a price action setup thereby biasing their mindset to what they see. We start with selection first of all to take a bigger picture view. So what is selection comprised of?
Selection is looking at where the money is flowing into and out of. Basically, what are traders focusing on right now. You see, most traders have short attention spans so it's important for us to find out which markets are hot right now as we want to make our money as quickly as possible.
In the stock market selection may be the process of looking at the best performing sectors right now. It may be a fundamental outlook on Amazon or Facebook stock. It also could be using technical indicators to find momentum.
The key is the daily chart and above helps us find this kind of information as we can see who the most dominant player is. If the market is going up over time and every time it dips buyers step in then we've found a great stock to trade as. In this instance going down to the 1 hour chart to position ourself for the bigger move is a good, well thought out plan. Going down to any timeframe below that will just be too noisy.
The great thing about the 4 Point Trading System is the fact you can trade it on the stock market, foreign exchange market, commodity market, indices and even cryptocurrencies!
5. Trading higher timeframes makes for a simple life
Trading is a very emotional game. After all, it's about make quick decisions in your head whilst analysing lots of different variables at once. Of course, technical analysis, having a plan and a strategy helps mitigate all these issues but we are still managing risk. The human mind is geared to just 'survive'. It is not geared to take on risk. Therefore, we need to be in a high quality state to make trading decisions.
Being in the right state means taking your time to put yourself in the right state before you trade. Looking at a 1 minute chart for 6 hours a day will definitely not put you in the right state! The higher timeframe allows us to walk away if we need to and not let other areas of our life affect our decisions in the market.
Of course, the real bonus factor is the fact you can go off and enjoy your time outside of trading by travelling, or spending time friends and family.
6. You can scale up more easily and exponentially grow your account
Most people trade the lower timeframes to make more money. The only problem is that you are faced with a lot of noise and a lot more emotion and pressure to perform. What these traders fail to realise is that if you can be profitable on the higher timeframe then it's far easier to scale up and grow your account. How? Risk management!
You see, if you had some consistent results over the course of the year risking $100 per trade there are two options to scale your success up. Most people go for the option to trade more by going to the lower timeframes. What they fail to realise is the more positions you have, the more emotions you have, the more problems you're going to face. The other option is to simply increase your risk per trade to $200. Without putting anymore hours in, placing anymore trades, learning anything new, you've just doubled your reward. Awesome right?
Now, most people say that is risky. They are right, if you don't do it the right way. Set yourself a target amount to reach before you can increase your risk per trade and then only incrementally increase it on good performance. The reality is, that if you want to become that millionaire trader you're going to have go get used to bigger numbers anyway!
7. More markets means more opportunities and more fun!
Financial markets are highly correlated. When the stock market is falling, gold and the Japanese yen could be rising as investors move into safe haven assets. The great thing about trading multiple markets is the fact you can see these correlations happening right in front of you. That means you can position yourself effectively whilst maximising on opportunities across the market range.
Also, trading should be enjoyable. When one market isn't throwing up any signals, trading other markets may give us the opportunities we need to profit. Of course, we never force a position and always need to be patient. However, with more markets we are diversifying and keeping ourself in the money flow.
The Trader Prophets Way!
After a long meeting at our annual team getaway, all the traders came to the same conclusion - higher timeframe trading is the way to go! Our team of ex-city traders and independent traders who actually trade for a living certify this way of doing things as the best way.
We like to take a view of the world, of the market place and then find the hottest market to trade. It could be the stock market trading the likes of Apple, Facebook or Amazon on a new product release. It could be trading the British pound on the back of high impact news events like Brexit. Or maybe it's the commodity market trading oil on cuts from OPEC. Or perhaps, it's just using the best technical analysis across any market regardless of what is happening in the news. It works, we live by it and we do it.
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